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Where Taxpayers and Advisers Meet

IHT Due

Another1
Posts:32
Joined:Sun Apr 04, 2021 12:17 pm
IHT Due

Postby Another1 » Wed Mar 30, 2022 2:42 pm

If a persons estate is valued at £350k investments and residence £220k; total £570k….and spouse is same,(residence t-in-c) and if that person dies with his/her Will leaving all to surviving spouse excepting a gift of £40k to another Benificiary, who pays the IHT due on this gift?…estate or Benificiary?…and presumably before probate can be granted?….thank you.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: IHT Due

Postby maths » Wed Mar 30, 2022 5:06 pm

In the absence of any direction in the will any IHT arising is a liability of the estate.

Yes IHT is due and payable prior to obtaining probate.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: IHT Due

Postby AGoodman » Wed Mar 30, 2022 5:20 pm

There wouldn't be any IHT due in the scenario you mention.

If there was a lifetime gift to another person or persons (exceeding in aggregate £325,000) then there would be IHT on the excess over £325,000. The donee is primarily liable but the estate can also be liable if they do not pay.

If the sum paid to a third party is a legacy under a will, the estate is liable for any tax (but again, any legacy up to £325,000 would be absorbed by the nil rate band so IHT free).

Another1
Posts:32
Joined:Sun Apr 04, 2021 12:17 pm

Re: IHT Due

Postby Another1 » Wed Mar 30, 2022 7:18 pm

There wouldn't be any IHT due in the scenario you mention.

If there was a lifetime gift to another person or persons (exceeding in aggregate £325,000) then there would be IHT on the excess over £325,000. The donee is primarily liable but the estate can also be liable if they do not pay.

If the sum paid to a third party is a legacy under a will, the estate is liable for any tax (but again, any legacy up to £325,000 would be absorbed by the nil rate band so IHT free).
Thank you for your comments…

If the sum paid to a third party is £40k,therefore less than NRB with no IHTas you say,is this sum deducted from the transferred NRB, ie £325k-£40k,such that the NRB for surviving spouse becomes £325K+£325k-£40k

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: IHT Due

Postby AGoodman » Thu Mar 31, 2022 10:40 am

yes - as the position stands now although it's actually proportionate so the calculation would be slightly different if the nil rate band increased by the time of the second death. A small increase in the NRB would give a similar answer.

Another1
Posts:32
Joined:Sun Apr 04, 2021 12:17 pm

Re: IHT Due

Postby Another1 » Thu Mar 31, 2022 4:13 pm

yes - as the position stands now although it's actually proportionate so the calculation would be slightly different if the nil rate band increased by the time of the second death. A small increase in the NRB would give a similar answer.
Thanks again…if the NRB changed/increased by time of second death,would this NRB change to affect the transferred NRB as well as the NRB for second deceased?…or look something like £400k+ £325k-£40k …or £400k+£400k-£40k?

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: IHT Due

Postby AGoodman » Fri Apr 01, 2022 10:38 am

The transferable nil rate band would be (325-40)/325 = 87.7% of the nil rate band at the time

Another1
Posts:32
Joined:Sun Apr 04, 2021 12:17 pm

Re: IHT Due

Postby Another1 » Fri Apr 01, 2022 12:43 pm

Thank you…understood!


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